The GBP/CAD cross has surged recently and is up for nine consecutive days, trading at the highest level in two months as the Canadian dollar weakened amid falling oil prices.
The macro calendar is rather empty today, but data released earlier by the Office for National Statistics showed public borrowing fell in November as spending on the pandemic eased and the furlough scheme came to an end but was still the second-highest figure for the month since records began in 1993.
Public sector net borrowing fell by 4.9 billion GBP from November last year to 17.4 billion GBP. However, this was higher than the 16 billion GBP expected by analysts and above the Office for Budget Responsibility’s forecast of 14.2 billion GBP.
The year-on-year decline was largely due to the fact that most of the country was in lockdown last year.
Meanwhile, the total debt reached 2.32 trillion GBP, equivalent to 96.1% of GDP and the worst ratio since March 1963. Considering the next round of lockdowns in the UK over the winter period, debt will continue to rise notably.
Meanwhile, Politico tweeted earlier that Boris Johnson is stuck between his scientific advisers and an increasingly disaffected Conservative Party over the seismic decision of whether to bring in new COVID measures over the Christmas Period.
CAD suffers amid weak oil
From other news, the Canadian dollar could be volatile after Canadian retail sales for October, due later in the day, and expected to improve notably month-on-month.
As previously said, the Loonie has been undermined by the falling oil prices. The WTI benchmark declined below 70 USD and the commodity is down 20% from this year’s highs at 85 USD. Therefore, some selling pressure appeared in the CAD, pushing the USD/CAD pair to the highest level in more than a year (the weakest level for the Canadian dollar in more than a year).
The GBP/CAD cross is now advancing toward the 200-day moving average, located near 1.7170. As the Pound seems overbought, considering the sharp two-week rally, we might see some profit-taking at the 200-day average, possibly ending the short-term uptrend for a while.
The support remains at the psychological level of 1.70 and as long as the price trades above it, the immediate trend seems bullish.
A bullish breakout above the 200DMA could push the price further higher, targeting the lows of the summer consolidation near 1.7270.